Is the iShares MSCI USA Islamic UCITS ETF (ISUS) Halal? A 33.33 Percent Screen on Total Assets, a 15 Percent Cap Its Largest Holding Has Already Passed, and What Ferri's Framework Says About the Fee: A Sharia Analysis for Muslim Investors (2026)

Author: Zaid Alissa, CTO and Halal Finance Researcher | Published: September 2026 | Updated: September 2026

The iShares MSCI USA Islamic UCITS ETF has been trading since 7 December 2007, which makes it older than almost every fund a British Muslim is likely to be shown today. It holds about 479 million euro, charges 0.30 percent a year, and its largest position is Microsoft at 15.80 percent of the fund. That last number is the interesting one, because the index it tracks caps any single issuer at 15 percent. Nothing has gone wrong. The methodology says the cap is applied at the index review and not again until the next one, and Microsoft has risen since. But it is the kind of detail that only appears if you read the rulebook rather than the factsheet, and reading the rulebook is what this article does.

The question is not whether ISUS is marketed as Sharia compliant. It is, and MSCI's Sharia advisers certify the index quarterly. The question is what the screen actually tests, where its thresholds sit against AAOIFI's, and what is left for the investor to do afterwards.

What ISUS Actually Is

Item	Value
Full name	iShares MSCI USA Islamic UCITS ETF USD (Dist)
ISIN	IE00B296QM64
London lines	ISUS quoted in pence, ISDU quoted in US dollars, same share class
Domicile and structure	Ireland, open ended investment company, UCITS
Inception	7 December 2007
Index	MSCI USA Islamic
Total expense ratio	0.30 percent a year
Fund size	EUR 479 million
Holdings	141 as of 30 July 2026
Replication	physical, optimised sampling
Distribution	distributing, semi annually
Securities lending	none
Custodian	State Street Custodial Services (Ireland) Limited
UK reporting fund status	yes

Fund facts from the justETF profile for IE00B296QM64, retrieved 4 September 2026. On 3 September 2026 stockanalysis.com reported 145 holdings for the London line, four more than the July snapshot, which is what a quarterly rebalanced index looks like between reviews.

The composition is the thing to look at first. The top ten are 50.92 percent of the fund: Microsoft 15.80, Micron Technology 6.26, Tesla 5.51, AMD 5.02, ExxonMobil 4.14, Johnson and Johnson 3.91, Cisco Systems 2.85, Intel 2.54, Applied Materials 2.53 and Lam Research 2.36. Those ten add to 15.80 plus 6.26 plus 5.51 plus 5.02 plus 4.14 plus 3.91 plus 2.85 plus 2.54 plus 2.53 plus 2.36, which is 50.92. By sector the fund is 50.46 percent technology, 11.31 percent healthcare, 8.92 percent industrials, 6.97 percent energy and 22.34 percent everything else. By country it is 89.54 percent United States, 3.99 percent Ireland, 1.56 percent United Kingdom and 4.91 percent elsewhere.

Half the fund in one sector is not an accident and it is not a manager's view. It is what happens when you remove banks, insurers and heavily indebted companies from a national index. The screen produces the tilt.

What the MSCI Islamic Screen Actually Does

MSCI publishes the rules. The MSCI Islamic Index Series Methodology, December 2025 edition, is a public document, and it is worth knowing that MSCI runs two different Islamic families with different arithmetic. The MSCI Islamic Index Series uses total assets as the denominator of its financial ratios. The MSCI Islamic M-Series uses average issuer market capitalisation, defined as the average of month end market capitalisation over the 36 months before the rebalancing. MSCI USA Islamic belongs to the first family, so total assets is the divisor.

Business activity comes first. A company is excluded if it is directly active in, or derives more than 5 percent of its revenue cumulatively from, the prohibited activities. The methodology defines that ratio explicitly as the sum of revenue from prohibited activities including interest income, divided by total income, where total income is total earnings including revenue and interest income, and interest income covers both operating and non operating interest. The prohibited list runs through alcohol, tobacco including cannabis other than for medical or pharmaceutical use, pork related products and conventional financial services, which is defined broadly enough to take in retail and investment banks, insurers, mortgage lenders, credit agencies, stock exchanges and consumer finance.

Then the financial ratios, with the denominator being total assets:

Ratio	Entry buffer	Threshold	Exit buffer
Total debt	30.00 percent	33.33 percent	35.00 percent
Cash plus interest bearing securities	30.00 percent	33.33 percent	35.00 percent
Accounts receivable plus cash	46.00 percent	70.00 percent	not applicable

A company that is not already in the index has to clear the tighter entry buffer. One that is already in is kept if it stays inside the threshold, and can be kept inside the exit buffer provided its averages over the last four reporting periods within a year remain within the threshold. It is dropped once it breaches for three consecutive index reviews.

On top of that MSCI applies a 15 percent issuer cap, at the index review, on the pro forma index using closing prices as of the announcement date. The methodology is candid about what happens next: if a weight breaches the cap because of price movements or corporate events between the announcement and the effective date, or between two rebalancings, the capping is not applied again. That is the whole explanation for Microsoft at 15.80 percent, which is 15.80 minus 15.00, or 0.80 percentage points, above the cap on the July snapshot. It is a disclosed feature, not a failure, and it means the cap is a rebalancing rule rather than a live constraint.

MSCI states that the methodology has been approved as Sharia compliant by its Sharia advisers' committee of scholars, and that those advisers reconcile the constituent list against MSCI's screening reports quarterly and issue a periodic certification for the period reviewed. That is a real governance process and it is more than several competitors disclose. It is also, precisely, a certification that the index followed its own rules. It is not an opinion that the rules match anyone else's.

The Riba Question

Allah says in Surah Al-Baqarah, verse 275:

وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا

"But Allah has permitted trade and has forbidden interest [riba]." (Saheeh International)

Three separate riba surfaces exist in a fund like this one, and the screen only addresses the first.

The first is the companies. A constituent may carry interest bearing debt up to 33.33 percent of its total assets, and may hold cash and interest bearing securities up to the same limit. AAOIFI Shari'ah Standard No. 21 on Financial Paper treats the share as an undivided ownership interest in the company's assets, which is why the investor's exposure to the company's borrowing is the thing being measured at all.

The second is impure income, which the screen tolerates rather than eliminates, up to 5 percent. MSCI's answer is a dividend adjustment factor, defined as total income minus the sum of revenue from prohibited activities and interest income, all divided by total income, updated quarterly. Take a company with total income of 100, prohibited revenue of 1 and interest income of 2: the factor is 100 minus the sum of 1 and 2, that is 100 minus 3, giving 97, divided by 100, which is 0.97. Three percent of the dividend is impure. MSCI applies that factor inside the index calculation to reinvested dividends. The fund distributes cash to you twice a year, and nothing in the index adjustment reaches your bank account cleansed. What the index does and what the investor owes are two different things.

The third is the fund itself. Ferri's account of the ETF wrapper notes that registered funds may lend their portfolios and earn what he calls "a small interest fee" (The ETF Book, 2008, p. 62, p. 78). justETF records securities lending for this fund as none. That is the answer a Muslim wants, and it is the single most useful line on the profile page.

Where the 33.33 Percent Sits Against AAOIFI's 30

AAOIFI's thresholds, as set out by Mufti Faraz Adam in "Making Sense of the 30% Rule in Islamic Finance" (Amanah Advisors, 14 December 2020), put interest bearing debt at or below 30 percent of market capitalisation, interest bearing deposits and securities at or below 30 percent, and prohibited income at or below 5 percent of total income. The impure income limit is the same as MSCI's. The debt limit is not, and the difference is not the 3.33 percentage points in the headline. It is the denominator.

The arithmetic of the crossover is short. MSCI's ceiling in money is 0.3333 times total assets. AAOIFI's is 0.30 times market capitalisation. They are equal when market capitalisation divided by total assets equals 0.3333 divided by 0.30, which is 1.111. Above that ratio AAOIFI's ceiling is the higher of the two. Below it, AAOIFI's is the lower.

Apply it to the fund's largest holding. Microsoft's total assets are 758,376 million dollars and its total debt 128,813 million dollars on its most recent balance sheet, against a market capitalisation of 3.79 trillion dollars on 3 September 2026.

MSCI's test: 128,813 divided by 758,376 is 0.16985, that is 16.99 percent, against a threshold of 33.33 percent. It passes.
AAOIFI's test: 128.813 billion divided by 3,790 billion is 0.03399, that is 3.40 percent, against a threshold of 30 percent. It passes.
MSCI's ceiling in dollars: 758.376 times 0.3333 is 252.77 billion.
AAOIFI's ceiling in dollars: 3,790 times 0.30 is 1,137 billion.
The ratio: 1,137 divided by 252.77 is 4.498, so AAOIFI would allow about four and a half times as much debt as MSCI does.

Microsoft's market capitalisation divided by its total assets is 3,790 divided by 758.376, which is 5.00, well above the 1.111 crossover. For a company priced that far above its book, the total assets divisor is by far the tighter of the two rules. This is the honest summary for a technology heavy index: for these companies MSCI's screen is stricter than AAOIFI's, not looser. The looseness runs the other way for asset heavy, cheaply priced companies, which this index has few of.

You can run the AAOIFI test on any individual holding yourself with our stock screener.

The Gharar Question

AAOIFI Shari'ah Standard No. 31 on Controls on Gharar in Financial Transactions makes a sale defective when its object cannot be adequately known. On disclosure this fund does well. The index methodology is published in full, the thresholds and buffers are in a table, the purification formula is written out, the capping rule and its exceptions are stated, and iShares publishes daily holdings. Compare that with Ferri's complaint about proprietary indexes, where "not enough public information is available to determine" how stocks are picked (p. 139).

What remains unknown is smaller but real. The screening data itself comes from MSCI Solutions and, where that is unavailable, from a third party ratings provider, and the underlying determinations are not published line by line. The quarterly certification confirms that the constituent list reconciles with MSCI's own screening reports. It does not publish the reports. An investor who wants to know why a particular company passed has the rule but not the working.

The Maysir Question

Nothing in the fund's construction is a wager. It is long only, physically backed by shares, and holds no derivatives, no leverage and no short positions. Ferri's warnings about leveraged and inverse products (p. 248) do not touch it.

The maysir risk with a fund like this is behavioural and sits with the investor. Ferri's own line is the right one: the ease of intraday trading "may cause some investors to trade too much" (p. 101). A semi annual distributing fund tracking a national index is a holding, not a position.

Ferri's Framework Applied

Structure. A UCITS open ended investment company that samples. In Ferri's terms this is a fund with manager discretion, and discretion means tracking error (pp. 78 to 79). The fund holds 141 of the index constituents by optimised sampling rather than replicating in full, which is the ordinary approach for a screened index of this size but should be understood as a source of divergence.

Index type. On Ferri's Index Strategy Box grid this is screened selection with capitalisation weighting, which puts it in the custom index category rather than the market index one (p. 127, p. 134). His cautions about disclosure, turnover and concentration apply.

Cost. The iShares Core S&P 500 UCITS ETF charges 0.07 percent a year. ISUS charges 0.30 percent. The gap is 0.30 minus 0.07, which is 0.23 percentage points, and on a 10,000 pound holding that is 10,000 times 0.0023, or 23 pounds a year. Set against Ferri's own benchmarks the fund looks reasonable rather than expensive: he puts the average market index ETF at 0.21 percent and the average custom index ETF at 0.51 percent (p. 200), so ISUS is 0.30 minus 0.21, that is 0.09 percentage points above the first and 0.51 minus 0.30, that is 0.21 percentage points below the second. The 0.23 point gap against the unscreened alternative is the price of the screen, and it is worth naming it as such rather than pretending it does not exist.

Concentration. Ferri notes that index caps are typically between 5 and 10 percent (p. 118). MSCI's is 15 percent, applied only at review. Half the fund sits in ten names and half sits in one sector.

Tax and access. UK reporting fund status is confirmed, which matters for a UK taxable account, and the fund is available inside an ISA or SIPP through the London lines.

Where Scholars Differ

On the divisor. AAOIFI measures debt against market capitalisation. MSCI's Islamic Index Series measures it against total assets, its M-Series against a 36 month average market capitalisation, and the Dow Jones Islamic screens against a 24 month average market capitalisation. No AAOIFI standard declares the total assets divisor invalid, and MSCI does not claim AAOIFI conformity for this index. Some scholars prefer the assets divisor precisely because it does not move with the share price, which is the point the FTSE Russell research material makes about asset based screening being the more conservative approach. Others hold that the market capitalisation divisor is what AAOIFI requires and that anything else is a different standard. Both positions are held by people who have read the same documents.

On purification. MSCI adjusts reinvested dividends inside the index. iShares distributes cash. Mufti Taqi Usmani, in "Principles of Shari'ah Governing Islamic Investment Funds" (albalagh.net), places the duty to give away the impure proportion on the investor, not on the index calculation. Between those two facts sits an unresolved practical question about what a distributing screened fund owes its holders, and this fund does not publish an investor level purification figure the way some competitors do.

On any interest bearing debt at all. The stricter view is that a company carrying interest bearing borrowing is not permissible to own regardless of the ratio. On that view neither the 30 percent rule nor the 33.33 percent rule saves the fund. It is a minority position among the contemporary standards bodies but it is not a fringe one, and an investor who holds it should know that this article does not answer it.

Practical Guidance

Read the index methodology before the factsheet. The factsheet tells you the fee. The methodology tells you what you own.

Check the securities lending line. For this fund it is none, and that is a genuine advantage over several competitors.

Do not assume the dividend arrives cleansed. MSCI's dividend adjustment factor operates inside the index calculation on reinvested dividends. Your semi annual cash distribution is not adjusted by it. Until the provider publishes an investor level purification figure, the calculation is yours to make and the amount is yours to give away.

Expect the concentration. Half in technology and half in ten names is the structural consequence of removing financials from a US index. If that is more single sector risk than you want, the world and emerging market versions of the same screen spread it differently, and our portfolio design article works through how to size a position like this one. If your portfolio also holds digital assets, the crypto screener applies the same discipline there.

Price the screen honestly. Twenty three pounds a year on ten thousand is what the filter costs against the cheapest unscreened alternative. That is a small number and it should be stated rather than hidden, because the argument for the fund is compliance, not outperformance.

Conclusion

ISUS is a serious product. It is nearly two decades old, it charges less than the average custom index fund in Ferri's data, it does not lend its portfolio, and the rules it follows are published in enough detail that an investor can check them. Against AAOIFI's thresholds it is, for the technology heavy companies it actually holds, the stricter of the two screens rather than the looser one, and the arithmetic above shows by how much.

What it does not do is finish the job. The screen tolerates impure income up to 5 percent and hands the investor a cash dividend with no purification figure attached. The 15 percent cap binds at the review and not between reviews. And the concentration that the screen produces is a real risk that no amount of compliance removes.

This article is educational and is not a fatwa. Consult a qualified scholar for a ruling on your own circumstances.

Frequently Asked Questions

Is ISUS the same fund as ISDU?

Yes. Both are London lines of the same share class of the iShares MSCI USA Islamic UCITS ETF, ISIN IE00B296QM64. ISUS is quoted in pence and ISDU in US dollars. The holdings, the fee and the net asset value are identical; only the settlement currency of the trade differs.

Does the fund lend out its shares?

No. justETF records securities lending as none for IE00B296QM64. This matters because lending income is an interest fee earned at fund level, which no company level screen would catch, and Mufti Faraz Adam identifies it as a defect in conventional ETFs in his ETF research paper.

Why is Microsoft above the 15 percent cap?

Because the cap is applied at the quarterly index review on the pro forma index, using closing prices as of the announcement date. The MSCI methodology states that if an issuer's weight breaches the cap because of price movements between the announcement and the effective date, or between two rebalancings, the capping is not applied again. Microsoft has risen since the last review, so its weight has drifted to 15.80 percent.

Is the 33.33 percent threshold weaker than AAOIFI's 30 percent?

Not necessarily, and for this fund's holdings it is stronger. MSCI measures debt against total assets while AAOIFI measures it against market capitalisation. The two ceilings are equal when market capitalisation is 1.111 times total assets. Microsoft trades at 5.00 times its total assets, so MSCI's ceiling of 252.77 billion dollars is far below AAOIFI's of 1,137 billion.

Do I still have to purify the dividend?

MSCI applies a dividend adjustment factor inside the index calculation to reinvested dividends. The fund pays you cash twice a year and does not publish an investor level purification figure. On Mufti Taqi Usmani's account of the obligation, the duty to compute and give away the impure proportion remains with you.

Why is half the fund in technology?

Because the screen removes conventional banks, insurers and financial services companies, and then removes companies whose debt exceeds a third of their assets. In a US index that leaves technology heavily overweighted. The 50.46 percent technology weight is a consequence of the filter, not a bet by a manager.

Is 0.30 percent expensive for a Sharia screened fund?

Not by the standards Ferri sets. He puts the average custom index ETF at 0.51 percent and the average market index ETF at 0.21 percent. ISUS sits between them, and the honest comparison is with the unscreened iShares Core S&P 500 UCITS ETF at 0.07 percent, which makes the screen cost 0.23 percentage points a year.